Meaning and Definition of Retailing:

Retailing is defined as a set of activities or steps used to sell a product or a

service to consumers for their personal or family use. It is responsible for
matching individual demands of the consumer with supplies of all the
manufacturers.
Retailing has become such an intrinsic part of our everyday lives that it is often
taken for granted. The nations that have enjoyed the greatest economic and
social progress have been those with a strong retail sector.
Why has retailing become such a popular method of conducting business? The
answer lies in the benefits that a vibrant retailing sector offers—an easy access
to a variety of products, freedom of choice, and high levels of customer service.
A common perception is that retailing involves only the sale of products in
stores. However, it also includes the sale of services such as those offered at a
restaurant, parlour, or by car rental agencies. The selling need not necessarily
take place through a store. Retailing encompasses selling through the mail, the
Internet, door- to-door visits—any channel that could be used to approach the
consumer.
Retailing – Introduction and Meaning
The distribution of finished products begins with the producer and ends at the
ultimate consumer. Between the two of them, there is a middle person—the
retailer. Retailing is defined as a set of activities or steps used to sell a product
or a service to consumers for their personal or family use. It is responsible for
matching individual demands of the consumer with supplies of all the
manufacturers. The word ‘retail’ is derived from the French word retaillier,
meaning ‘to cut a piece of’ or ‘to break bulk’.
Retailing has become such an intrinsic part of our everyday lives that it is often
taken for granted. The nations that have enjoyed the greatest economic and
social progress have been those with a strong retail sector. Why has retailing
become such a popular method of conducting business? The answer lies in the
benefits that a vibrant retailing sector offers—an easy access to a variety of
products, freedom of choice, and high levels of customer service.
A retailer is a person, agent, agency, company, or organization, which is
instrumental in reaching the goods, merchandise, or services to the ultimate
consumer. Retailers perform specific activities, such as anticipating customers’
wants, developing assortments of products, acquiring market information, and
financing.
A common perception is that retailing involves only the sale of products in
stores. However, it also includes the sale of services such as those offered at a
restaurant, parlour, or by car rental agencies. The selling need not necessarily
take place through a store.
Retailing encompasses selling through the mail, the Internet, door- to-door visits
—any channel that could be used to approach the consumer. When
manufacturers like Dell Computers sell directly to the consumer, they too
become retailers.
The world over retail business is dominated by small family-run chains and
regionally targeted stores. Gradually more and more markets in the Western
world are being taken over by billion-dollar multinational conglomerates, such
as Wal-Mart, Sears, McDonald’s, and Marks and Spencer.
The larger retailers have set up huge supply or distribution chains, inventory
management systems, financing pacts, and wide- scale marketing plans, which
have allowed them to provide better services at competitive prices by achieving
economies of scale.
A retailer’s cost and profit varies depending on their type of operation and
major product line. They usually manage a profit of 9-10 per cent on their sales.
Retail stores of different sizes face distinct challenges and their sales volume
influences business opportunities, merchandise purchase policies, nature of
promotion, and expense control measures.
As we all know, the ease of entry into retail business results in fierce
competition and better value for customers. To enter retailing is easy, and to fail
is even easier. Therefore, to survive in the retailing business, any enterprise
must perform its primary role of catering to customers satisfactorily.
Over the last decade, there have been sweeping changes in the general retailing
business. For instance, what was once a strictly ‘made-to-order’ market for
clothing is now a predominantly ‘ready-to-wear’ market? Flipping through a
catalogue, picking the right colour, size, and type of cloth a person wanted to
purchase, and then waiting to have it sewn and shipped used to be the standard
practice in the earlier days.
By the turn of the century, some retailers set up a storefront wherein people
could browse whereas new pieces were being sewn or customized in the back
rooms. Almost all retail businesses have undergone a similar transition over the
years.
In an era of globalization, liberalization, and a highly aware customer, a retailer
is required to make a conscious effort to position himself distinctively to face
the competition. This is determined to a great extent by the retail mix strategy
followed by a company to sell its products.
A major development in the recent times has been the emergence of varied
retail formats that have started operating in most product categories. For
instance, there are large department stores that offer a huge assortment of goods
and services. There are discounters who offer a wide array of products, and
compete mainly on price. For example, Big Bazaar and Reliance Mart. There
are also the high-end retailers who target extremely niche segments with top-of-
the-line brands such as Louis Philippe and Dior.
Each of these retailers have their distinct advantages, and it is interesting to see
how these advantages play out. For example, during tough economic times, the
discount retailers tend to outperform their rivals whereas the opposite is true
when the economy is doing well. The more successful retailers attempt to
combine the characteristics of more than one type of retailing to differentiate
themselves from the existing competition.
In today’s competitive environment, retailers have redefined their role in
general, and in the value chain in particular. They act as gatekeepers who decide
which new products should find their way to the shelves of their stores. As a
result, they have a strong say in the success of a product or service being
launched into the market.
A product manager of household appliances claimed, ‘Marketers have to sell a
new product several times, first within the company, then to the retailer, and
finally to the user of the product.’
It is a well-established fact that manufacturers need to sell their products
through retail formats that are compatible with their business strategy, brand
image, and market profile to ensure a competitive edge.
They have to make an optimum selection of goods to be sold given the
following major concerns:
1. Selling space available is relatively fixed and must return maximum profits.
If such space is occupied by merchandise that is not moving, it will not result in
profit. The retailer may have to resort to substantial price reductions to get rid of
the unsold stock.
2. There is always the risk of non-performance in terms of quality, supplies,
etc., which in turn harms the image of the retail outlet.
Retailing is a dynamic industry—constantly changing due to shifts in the needs
of the consumers and the growth of technology. Retail formats and companies
that were unknown three decades ago are now major forces in the economy.
Therefore, the challenges for retail managers the world over are increasing—
they must take decisions ranging from setting the price of a bag of rice to setting
up multimillion- dollar stores in malls.
Selecting target markets, determining what merchandise and services to offer,
negotiating with suppliers, training salespeople—these are just a few of the
many functions that a retail manager has to perform on a perpetual basis.

Retailing – History of Retailing

The early peddler with his trinkets had to go from tribe to tribe and from village
to village either on foot or by donkey as fast moving transport vehicles were not
available. In the orient, the camel was used and long caravans loaded with only
luxury goods like spices, silks etc.
The earliest traders were the Cretans who sailed the Mediterranean and carried
on trade with the people of that area. The Phoenicians followed the Cretans as
the traders of this region. These merchants Specialised in shipping, during this
period. These shipping merchants sold goods in retail and wholesale to other
regions.
Tyre and Sidon became the great market cities of the world. Phoenician traders
succeeded by the Romans. The first middlemen who specialised in marketing
were probably retailers, but they had no allegiance to consumer sales. They used
to sell to producers, other merchants or consumers.
During the time of Roman Empire, shops became numerous in Rome and other
cities of the empire. Numerous small shops were set up within veritable
shopping centres. Roman ruins indicate that the world’s first departmental store
was in Rome. The fall of the Roman Empire marked the collapse of retail trade
also.
The period following the Roman Empire was known as ‘dark ages’ in the
history of retailing. During this period, the chief means of retailing was only
peddlers, who with their stores on their backs used to go from village to village
to sell their goods. Dishonesty in trading was not uncommon and the traders
used to deceive the villagers by offering inferior quality goods for higher prices.
This was the reason why the rulers, scholars and priests looked down the
retailing profession. There were instances of penalising the traders for their
malpractices. This is clear from the Magna Charta when it reads, “merchants
shall have safety to go and come, to buy and sell without any evil tolls, but by
ancient and honest customs”. During the tenth century, trade began to revive in
a number of Italian cities.
The centre of the resurgence of trade was England and other Italian cities.
Merchant middlemen developed by 1000 AD and specialists like smith, tailor,
cobbler, miller, baker etc., emerged. They were among the first of the modern
retailers, though their basic function was production.
These producer retailers sold directly to consumers, by hawking their goods
from village to village or street to street.
During 13th century, markets and fairs, assumed greater importance. These
early markets and fairs had a religious foundation. On festival days, people used
to gather at religious places and exchange their goods besides worshipping.
Later, it became customary for people to gather at religious places for the
exchange of goods.
Therefore, it was said “there is no great festival without a fair, no fair without a
festival”. These markets and fairs were to be held with royal sanction. The king
promised peace and security to the life and property.
There were number of laws to regulate these markets and fairs such as, no fair
can be allowed within 7 miles of the previously established fair, no selling can
be carried out before or after the fair, no false rumours can be spread.
Forestalling, regrating and engrossing were prohibited.
In the early period of history, they have no permanent establishments at one
place. The larger markets were called fairs and which lasted for longer period.
They were very few in number. Merchants from all over the country and even
from foreign countries used to attend these fairs, for selling their goods.
Though barter was the order of the day, gold and silver was also used as a
medium of exchange, to some extent. Gradually, fairs became places of
amusement as well as trading centres. The practice of holding the fairs can be
seen even today, in rural areas, in the form of jatharas or melas and in urban
areas, in the form of trade fairs, exhibitions, etc.
The recently held trade fairs in the name of India Fair by Indian Government in
countries like the U.S.A., France, Germany etc., come closer to this concept.
The markets of short duration (lesser than that of fairs) by a week or so are
popularly known as weekly markets.
Though there are no evidences of these weekly markets in Western countries, it
was very much practiced in backward countries. It is strongly believed that
since the time gap between the fairs was much longer, in some cases years and
months, the fairs could not satisfy the consumers’ desire for more goods in
frequent intervals.
This must have prompted the merchants to hold markets with a shorter gap of
time-say a week or fortnight. These weekly markets are prevalent in almost all
the backward countries of the world including India. Those who were unable to
go to the fairs and weekly markets were served by the peddlers who procured
goods from fairs and weekly markets.
By about 15th century, a new development in the history of retailing occurred.
Artisans and tradesmen no longer depended solely on fairs and markets or hats
for selling their goods, but opened small shops. This was also necessitated by
the fact that the consumers wanted goods in more frequent intervals on daily
basis and that too at the vicinity of their residences.
This shopping culture was the result of unlimited wants of modern age and also
increased purchasing power. In the beginning, there used to be a wooden frame
in front of the house called ‘stall’ upon which goods were displayed for sale.
Later these were developed into a permanent stacking equipment called shop.
The early English shopkeeper had his home and his shop under the same roof in
which front served as shop and the back part for residence. In order to identify
the type of shop, some signs were to be put in front of their shops. To promote
sales, someone used to be kept outside the shop to cry the articles available in
the shop. The shop system had become quite successful in England.
Their importance can be observed from the Napolean’s reference to the English
as a “nation of shopkeepers”. Though in America, the retailer has reached the
highest levels in the business and social life, most of the American retailing
institutions originated only after 1850. Prior to that, most Americans lived in
rural areas and were self-sufficient. Transportation was poor in rural areas.
Itinerant peddlers and general stores were popular.
As the frontier of trading moved on, many of the trading posts developed into
general stores-characteristic of American, institutions. The retailer or
shopkeeper kept a general stock of merchandise like calico and other cotton and
woolen goods, household and farm hardware, staple groceries, stationery and
medicines, breweries, etc.
As the customers were few with limited wants and limited purchasing power,
the retailer used to stock only necessities that too of one variety. Lack of variety
of stock was also due to lack of capital. As people’s income increased, their
desires increased and accordingly the retailer increased not only the size of the
stock, but also the variety of goods.
The luxuries of one age became the necessities of the next. Very often goods
were to be exchanged with the agricultural goods like wool, wheat, meat, etc.,
brought by the farmers. The retailers also extended credit to the farmers for
longer periods which generally coincided with harvest season. The store used to
serve even as Post Office.
Improvement in the means of transportation, people could move to greater
distances for shopping and as a result the business of small towns was shifted to
larger towns. However, the large and prosperous general stores did their
business well. Many of the modern general stores adopted up-to-date methods
of retailing and forged ahead in the face of competition.
By rendering continuing service to their farming communities and giving good
values, they built up a large and loyal clientele. There is a certain kind of
competition between general store and chain stores.
For shopping and speciality goods people are inclined to go to a nearly city
where they can purchase in larger stores carrying more stocks of merchandise
while convenience goods are shoppen in local general stores. The general store
has an advantage in its location close to its customers and this led to personal
relationship between the retailer and his customers.
Emergence of Modern Retail Institutions:
Through the centuries, the retail trade tried to provide goods and service to
satisfy consumers’ wants. The agencies it used to accomplish this purpose have
been not static but rather kaliedoscopic, changing constantly with the advent of
new ideas and new conditions.
The industrial revolution which began in 18th century with large scale
production accompanied by mass scale, marketing, and improvement in the
quality of life, changing buying behaviour, the growth of cities and the
increasing concentration of population in urban centres were instrumental in the
emergence of new patterns of retailing methods and institutions.

Retailing – Evolution of Retailing

Retailing has been a very old phenomenon. It can be traced back to the time
when trade began. Goods were sold either in some marketplaces or they were
sold in small quantities by some peddlers. In the medieval times trade was
dependent on local sources since there was hardly any mode of transportation
and thus they used to be limited to close by places. For the products that are
regarded as specialty, customers travelled quite a distance.
Even in prehistoric times, people travelled much space in order to arrange the
merchandise in the areas where goods or products are less or short in supply.
Products of basic and outmost necessary were provided by peddlers. Centuries
after centuries, there was flourishment of retail market in top towns and cities
globally, providing huge variety of merchandise worldwide? It is believed that
in the seventeenth century the flea market (original) started in the suburbs of
Paris as Marche’ aux paces.
The area or place in which sellers sold their merchandise in earlier days as
global flea market developed into congregation of retail. There is evidence that
retailing existed in ancient Greece, and in its cities like Troy. At that time also
retailing catered to the need of those societies. People of that time were called
entrepreneur, since they converted the need and want of societies into
opportunities to earn sufficient profits.
We can find the evolution of retail business in the Indian subcontinent with the
formation of a store of kirana type as well as a store of mom and pop type.
Traditional outlets are used by local people for daily use items. KVIC with
government’s help, have many rural retailing and indigenous franchise stores.
There were few companies which started their chains of retail business. As time
passes, new entrants entered into market from manufacturing to pure retailing
unit. After 1990, different retail outlets such as Foodworld, Planet M and Music
World and Crossword had made their presence in the market.
After that, the concept of hypermarket and supermarket evolved. Customers had
global experience in the shopping malls in the towns and urban centres. The
evolution of retailing sector resulted into continuous improvement in the supply
chain management (SCM), distribution channels, technological advancement as
well as backend operations which resulted into more and more mergers and
acquisitions and huge investments.

Retailing – Concept of Retailing

It is essentially the marketing concept of a customer-centred, company-wide
approach to developing and implementing a strategy. It provides the guidelines,
which must be followed by all retailers irrespective of their size, channel design,
and medium of selling.

The retailing concept covers four broad areas and is an essential part of the
retailing strategy:
(i) Customer Orientation – The retailer makes a careful study of the needs of the
customer and attempts to satisfy those needs.

(ii) Goal Orientation – The retailer has clear cut goals and devises strategies to
achieve those goals.

(iii) Value Driven Approach – The retailer offers good value to the consumer
with merchandise having the price and quality appropriate for the target market.
(iv) Coordinated Effort – Every activity of the firm is aligned to the goal and is
designed to maximize its efficiency and deliver value to the consumer.

The retailing concept, though simple to adopt is not followed by many retailers
who neglect one or more of the points enumerated above. There must be a
proper balance of all the aspects of this concept for the retailer to achieve
success. The retailing concept, while important is limited by its nature as it does
not cover the firm’s internal capabilities or the competitiveness of the external
environment.

It however remains an important strategic guide. The retailing concept can be

used to measure the retailers’ performance through three parameters – the total
retail experience, customer service, and relationship retailing. The total retail
experience refers to all the ingredients of a customer’s interaction with the
retailer. This includes all activities from parking to billing.

If some parts of the retail experience are unsatisfactory, the shopper may decide
not to patronize that particular outlet. Therefore, it is necessary for a retailer to
ensure that every element in the experience must aim at fulfilling customer
expectations. This experience means different aspects for different types of
retailers — for an upper-end clothing retailer this might imply the presence of
plush interiors and air conditioning while a discount store needs to have
adequate stock.

One of the biggest challenges for the retailer today is to devise new ways of
attracting customer attention to be able to position themselves differently from
competitors. Many novelties in retailing, for example, the theme restaurants,
have emerged and there is a battle to snare the customer’s attention. Sometimes
though, elements of the retail experience can be beyond the control of the
retailer, like the levying of sales tax or the speed of online shopping.

Customer service refers to the tangible and intangible activities undertaken by a

retailer in combination with the basic goods and services it provides. It is part of
the value- driven approach adopted by retailers in a bid to differentiate
themselves and occupy a strategic position.

Among the factors that drive a firm’s customer-centric approach are store hours,
parking access, sales personnel, amenities like a recreation area for children,
and coffee shops. Different people evaluate the same service in various ways.
Even an individual may do so at different times due to intangibility. People’s
assessment of a particular service is based not necessarily on reality but on
perception.

Keywords such as customer orientation, innovation, and flexibility have become

‘must-haves’.

These words have been repeated like mantras for decades now but rarely have
they been put into practice. The service mentality frequently encountered in the
Indian retail sector can still be unpleasant even to those customers willing to
make purchases. The realisation that the services provided do not suit the prices
demanded impels rationally acting customers to switch to the discounters.

Stand-alone businesses and the owner-managed specialist stores are suffering in

particular and, at least in urban India, appear to have passed their zenith. Many
retail companies have now realised that the competition for the purchasing
power of the customers has long crossed the boundaries of their own narrow
sectors. New competitors have been courting the attention of customers and
trespassing on the traditional territory of the retail companies.

Some of the major criteria for the fight customer approach are as follows:
1. Creating the right environment;

2. Listening to customers;

3. Providing rewards to the best customers; and

4. Realising the lifetime value of consumers.

The concept of lifetime value of consumers is employed in relationship

marketing. Retailers need to establish relationships with existing customers to
motivate them to return regularly. The ongoing process of identifying and
creating new value with individual customers over the lifetime of a relationship
is relationship marketing.

It is mutually beneficial in nature creating a win-win solution for both the

retailer and the consumer by allowing the retailer to be profitable and giving the
consumer value. This is especially important because it is much harder to attract
new customers than it is to retain old ones. It is a blend of product, quality, and
services.
Relationship marketing uses the event-driven tactics of customer retention
marketing, but treats marketing as a process over time rather than single
unconnected events. By moulding the marketing message and tactics according
to the lifecycle of the customer, the relationship marketing approach achieves
very high customer and is highly profitable.

Using the relationship marketing approach, the retailer must customise

programmes for individual consumer groups and the stage of the process they
are going through as opposed to some forms of database marketing where
everybody would get virtually the same promotions, with perhaps a change in
offer. The stage in the customer lifecycle determines the marketing approach
used with the customer. A simple example of this would be sending new
customers a ‘welcome kit,’ as an incentive to make a second purchase.

Retailing – Meaning and Definitions

Retailing is a set of activities performed in selling the goods and services
directly to the end users. The goods and services sold to the consumers are
meant for their personal use and not for resale or business activity. Retailing is
the last activity conducted in the chain of product distribution down to the
consumers.
In principle, retailing is a business activity which involves the sale of goods and
services to a large number of consumers spread in a large area. The retailer or a
retail store is like any business enterprise whose sales volume comes primarily
from retailing. There are different forms of retailing. Many of the forms keep
emerging according to the convenience of the buyers and retailers.
In large towns, retailing is organised and mostly performed through stores and
automatic vending machines. However, in the rural areas, the retailing of goods
and services are conducted through a traditional pattern by displaying the goods
in mobile vans, carts and on footpaths. For understanding the types of retailers
and their functions, we can broadly classify the retailing network into two
categories – (i) store retailing and (ii) non-store retailing.
Like the growth cycle of business firms, the retailing activity also passes
through the stages of embryonic, growth, maturity and decline. A retail store
observes the period of accelerated growth, reaches the stage of maturity and
starts declining. It has been observed that the retail stores of older fashion took
more than five decades to reach the stage of maturity in terms of the volume of
sales, coverage of consumers and expansion of the chain of retail stores.
However, in the modern era, the store retail types reach their maturity very fast
due to the organised retailing management.
According to Cundiff and Still, “Retailing consists of those activities involved
in selling directly to ultimate consumers.”
Thus, Retailing includes all the activities involved in selling goods or services
directly to final consumers for personal, non-business use. A retailer or retail
store is any business enterprise whose sales volume comes primarily from
retailing.
“A set of business activities carried on to accomplishing the exchange of goods
and services for purposes of personal, family, or household use, whether
performed in a store or by some form of non-selling.” – American Marketing
Association

“Retailing includes all the activities involved in selling goods or services to the
final consumer for personal, non-business use.” – Philip Kotler

According to Candiff and Still, “Retailing consists of those activities involved

in the selling directly to ultimate consumers.”
From the above definitions, the followings important features of retailing
come into light:
i. Retailing is essentially an economic activity.

ii. It includes sales of goods as well as services.

iii. It involves earning profits through customer satisfaction and retention.

iv. It aims at increasing the number of customers.

v. It is very dynamic by nature.

vi. It is customer oriented.

vii. It involves lesser quantity in terms of the goods sold.

viii. It involves personal touch with the customer.

ix. It is the last link in the distribution channel.

x. It attracts customers by using various methods such as discounts, vouchers,

lucky draw schemes, coupons, etc.
xi. It includes the customers who buy the articles for non-business purposes.

Retailing – Characteristics of Retailing and Retailers

1. There is direct end-user interaction in retailing.
2. It is the only point in the value chain to provide a platform for promotions.
3. Sales at the retail level are generally in smaller unit sizes.
4. Location is a critical factor in retail business.
5. In most retail businesses services are as important as core products.
6. There are a larger number of retail units compared to other members of the
value chain. This occurs primarily to meet the requirements of geographical
coverage and population density.
Characteristics of Retailing and Retailers:
1. Retailing brings goods and services closer to the consumers
2. A Retailer is the last link in the distribution channel
3. Retailers buy in large quantities but sell in individual units
4. There are large number of retailers as compared to manufacturers and
wholesalers
5. Retailing can be organised (branded chain stores) or un-organised (that is
normal stores that we find in our neighbourhood)
6. Retailing provides a direct contact with the customers
7. Retailing is the function that keeps an eye on the pulse of the customers
8. Retailing can also be done through online stores, and
9. Provides a variety of products at a single place.

Retailing – 6 Main Features

1. Sale to the final consumer – The most important characteristic of retailing is
that it involves the sale of the product or service to the final consumer.
2. Various channels – In retailing the goods and services can be sold either in
person, through mail, through telephone, through vending machines or the
internet.
3. Small order size – The order size handled by a retailer is much smaller as
compared to the wholesaler.
4. Large number of orders – The retailer handles a large number of orders.
5. Wide variety of customers – The retailer handles a wide variety of customers.
6. Keeps a large assortment of goods – The retailer keeps a wide variety of
goods.
Retailing – Top 4 Theories
Four theories of retail institutional change have originated in North America,
but they are equally applicable to the other parts of world.

These are:
1. Theory of natural selection in retailing

2. Theory of wheel of retailing

3. General-specific-general cycle or accordion theory

4. The retail life- cycle theory.

1. Theory of Natural Selection in Retailing:

Theory of natural selection in retailing is based on the famous of theory of
Charles Darwin of natural selection in “origin of species”. This can be stated as
‘retail types (or units), which best adjust to their environment, are most likely to
survive’. In this theory environmental factors play major role in survival of
retail type.

The department store is often cited as an example of a retail type failing to adapt
quickly to changes in external condition like suburban growth and congestion in
town centres. However these very factors have helped the growth out-of-town
stores.

The major environmental factors affecting retailing are:

i. Changes in the consumer character-

a. Demographic, e.g. population age changes

b. Social, e.g. product and service preferences

c. Economic, e.g. changes in real incomes.

ii. Changes in technology, e.g. greater ownership, use of motorcars, food
freezers, and microwave ovens.

iii. Changes in competition, i.e. changes in the levels of competitive strength

within the areas of influence.
If a retail outlet or type does not address to these factors, it may have the fate of
dinosaurs.
2. Theory of Wheel of Retailing:
This theory, first championed by Professor McNair of Harvard, postulates that
an efficient innovatory form of retailing (such as discounting) enters the market
and attracts the public by its new appeal. Growth and maturation occur during
which market shares are increased, but trading- up occurs and finally the firms
become high cost, high price retailers once again vulnerable to the next
innovator.

Reasons for its occurrence include:

i. Organizational Deterioration:
As young innovators age they become more conservative and may seek greater
social acceptableness. Again, they may be unable to recruit management
capable of extending the life of the innovation.

ii. Economic Factors:

The popularity of non-price competition produces higher gross margin
requirements as an institution matures. It suggests that non price competition is
less ruinous than price competition.

For example, new type of retail firms (such as discount stores in 1950’s in
USA) enters the market with low status, low mark-up and low prices. Over time
as they become successful, they open more stores offer more services and as a
result their costs increase and they have to charge higher prices to their
customers.

This in turn makes them vulnerable to new entrants who will use the similar
strategy, i.e., low status, low mark up and low prices. Diagram 3.3 depicts
theory of wheel of retailing.
3. General-Specific-General Cycle or Accordion Theory:
This describes the tendency for retail business to become dominated
(alternatively) by generalists, then specialists and then generalists again.

The switch to the specialist store from the old time ‘general’ store occurred
because:
(a) The greater variety of customer goods available could not be accommodated
in the old general store
(b) Growth of cities meant that consumer markets allowed profitable
segmentation

(c) It provided a social content to the shopping trip, which was required as
society became more complex and impersonal.

The tendencies helping to create the new ‘general’ store (superstore or

hypermarket) include:
(i) Joining complementary lines, e.g. meat, groceries and produce
(ii) Creaming, i.e. taking the most popular lines from other retail outlets’ ranges,
e.g. paperbacks, confectionery, to create small but sure profits

(iii) Scrambling, i.e. the taking of risky merchandise from other outlets means
buying high margin, lower stock-turn lines, e.g. unit audio, expensive toys

(iv) Adding complete ranges ‘borrowed’ from other institutions, e.g. Marks &
Spencer selling food to increase the physical density of shoppers in their stores

(v) The growth of shopping centres. Large modern air-conditioned centres,

particularly those with a substantial food complement, are somewhat like huge
general stores. Note also the return to small convenience stores which are now
competing successfully primarily by staying open for long hours.
4. The Retail Life-Cycle Theory:
The retail life-cycle theory is based on the product life-cycle theory. The retail
life-cycle theory suggests that retail institutions also have a life-cycle which can
be divided into four phases- innovation, growth, maturity and decline just like
product life-cycle theory.

In the innovation stage, the new retailer will have few competitors, rapid growth
in sales but low profitability due to start-up costs, etc. In the growth phase, sales
growth is still rapid and profitability is high due to the economies of scale now
possible. However competitors will spot this and begin to encroach on this
market.

At the maturity stage, there are many competitors, sales growth has declined
and profitability moderates. In the final decline phase, sales and profits fall and
new, more innovatory retailers are developing and growing. It has also been
suggested that the life cycle of retail institutions is getting shorter.

Retailing – Importance to the National Economy (Global Importance)

In the United States there are more than 2.4 million retailing institutions
accounting for well over $1.5 trillion in sales. About 14 percent of U.S. workers
are employed in retailing, and retailers’ sales account for approximately 97
percent of the sizable chunk of the gross national product known as personal
income.

Sales figures give the impression that giant companies dominate the field of
retailing. However, small retail companies can and do fare very well. Such
success requires careful selection of target market segments that can be better
served by smaller companies, along with the development of an appropriate
marketing mix.
Retailers are a diverse group of businesses. In the distribution of food there are
supermarkets, convenience stores, restaurants, and various specially outlets.
Merchandise retailers may be department stores, apparel stores, consumer
electronics stores, home improvement stores, specially retailers, or various types
of retailing systems for home shopping. Service retailers, such as movie theatres
and barber shops, are as diverse as the, types of services offered for sale.
Furthermore, some retailers, like Sears, bridge several categories. Sears is both
a merchandise retailer with department stores and a service retailer with
financial services such as Allstate Insurance. Sear’s sales volume for all its
businesses (about $57 billion) makes it the largest U.S. retailer. However, Wal-
Mart’s merchandise sales (about $41 billion) exceed Sear’s merchandise sales
volume (approximately $32 billion).
Identifying retailers by industry or type of merchandise is useful. However,
several other classifications help us better understand the nature of retailing.
Some More Importance of Retailing:
Retailing occupies a key role in the world economy today. The importance of
retail as an industry can be understood from the fact that the fortune 500 list of
companies is headed not by a manufacturing firm but a retail major. The 2010
fortune 500 list of America’s largest corporations is headed by the retail firm
Wal Mart.
And in the Global Fortune 500 list of 2009 Wal Mart has the 3rd place. In fact
the fortune 500 list has about 50 retail organisations on its list. As an industry
retailing not only contributes to the GDP, but it also employs a large number of
people. In India retailing is believed to employ nearly 8% of the total workforce
of the country.
Retailing is important to the national economy for the following reasons:
1. A big part of our personal income is spent on retail goods.
2. It is a major source of employment.
3. In the distribution system, retail is the link to the ultimate consumers.
4. The level of retail sales indicates the consumer’s purchasing power, thus it
becomes the basis for determining the economic status of the people of a
country.
5. It adds value to the product because it creates time, place and possession
utility.
6. It accounts for a major portion of marketing costs.
7. Taxes from retail store add income to our national treasury.

Retailing – 7 Major Functions

Retailing constitutes the final link in the distributive chain. Therefore, it is
responsible for the performance of several important marketing functions.
Some of these functions are:
1. Assembling of goods from various wholesalers.
2. The physical movement and storage of goods for the supply to the final
consumers to meet their needs and requirements.
3. The providing information concerning the nature and use of goods to the
wholesalers and producers. It also inform as about the market trend.
4. The standardisation, grading and final processing of goods which have been
left in graded or unstandardised by wholesalers.
5. The provision of ready availability of goods of various qualities and of
various manufacturers.
6. The assumption of risk concerning the price, nature and extent of demand of
goods as long as they remain unsold.
7. The financing of inventory and the extension of credit to consumers for a
short period.

Retailing – 2 Main Channels: Multi-Channel Retailing and E-Commerce

Channel # 1. Multi-Channel Retailing:
Retail does not always have to start with a bricks and mortar presence. Sears
(United States) have long been established retail giant. However, they opened
their first store in 1925, only to complement their catalogue channel, launched
way back in 1886.
Retail Channels and Multi-Channel Retailing:
Retail channels are ways through which a retailer sells its products. Some of the
well-known retail channels used by companies around the world. Most of the
business is done through physical stores but other channels like online shopping
and catalog sales are also important. Choosing which retail channel to be used
by a channel depends on the types of service a retailer is providing and also the
potential customer behavior.
Currently we are seeing blurring of retail channels. A customer now has
“anytime anywhere” shopping options, so it also becomes important for retailers
to be present in more than one channel so as not to lose customers.
Multi-channel retailing is selling through more than one channel. This approach
increases the reach of retailers by giving them options to satisfy larger customer
base, hence do more business.
Different Retail Channels:
Different Retail Channels are listed below:
i. Brick & Mortar Stores – The degree of specialization differentiates types of
retailers. Department and general merchandise stores offer a wide range of
items, while specialty retailers offer a broad selection within a product category.
ii. Direct Response Channels – In direct response channels, retailer initiates the
contact with its potential customers and approaches them directly. It’s more
personal, and conversion rates (potential to member) are higher. Internet
Channels are also part of Direct Response channel.
There are other retail channels as well like Selling direct to the consumers,
Souvenir Outlets, Institutional sellers like Restaurant Chains, etc.
Multi-Channel Retailing:
In today’s world, customers want to have “anytime anywhere” shopping
experience. Advancement in technology has led to improvement in retail
channels too. Technology has given rise to a new kind of business – the e-
commerce. Ebay(dot)com and Amazon(dot)com are just two of the many
successful enterprises who have succeeded by using internet.
With so many retail options, customers are not confused or complaining. In fact
they have become even more demanding, thus leading to the emergence of
multi-channel retailers.
Drivers of Multi-Channel:
More than one third of shoppers use at least three retail channels to buy
products and service. Like it or not, retailers have to go multi-channel way.
Traditional brick and mortar stores are going online. Online shopping giant,
Amazon offers pick up locker. You will find Dell laptops in stores now.
We see that it’s the customers who are changing how retailers do their business.
Alternate channels give more options for retailers. For example, store real estate
is fixed and it is expensive to expand the space of all the retail stores. So,
retailers generally carry limited SKUs (Stock Keeping Unit) in store, however
they can offer more options via online.
Multi-channel retailing is also used by retailers as competitive strategy and
opportunity to differentiate from the rest.
Benefits of Multi-Channel Retailing:
Multi-channel retailing is not a choice but a must in today’s competitive market.
Multi-channel customers are the most sophisticated, demanding and time-
starved. They are also the most valuable assets for your brand.
That being said, retailers are facing increasing pressure to create superior
customer experience across channels because today’s customers expect their
shopping experiences to be consistently excellent regardless of the channel.
Many retailers are intimidated by the idea of creating a comprehensive and
cohesive multi-channel experience and they question whether it’s worth the
effort.
The four benefits that make investing in multi-channel strategy worthwhile
include:
i. Improved customer perception
ii. Increased sales
iii. Better data collection
iv. Enhanced productivity.
These benefits make investing in the strategy worthwhile. Retailers who
recognize the importance of the fundamental change in customer expectations
and embrace the challenge of creating multi-channel experience excellence will
remain on the competitive edge.
Multi-Channel Experience Management can help you understand how each
customer views his or her journey and ensure the best experiences occur at each
stage to build loyalty and foster advocacy.
There are a large number of organizational and customer related benefits to be
gained from implementing a multi-channel strategy.
Here are a few:
a. Organizational Benefits:
i. Increased revenue and growth opportunities – more touch points with target
market
ii. Better responsiveness and sensitivity to changing environments
iii. Competitive advantage over pure-plays, particularly around immediacy,
education opportunities for complex products and easy e-merchandise returns.
iv. Better data collection to know customer
v. Organizational efficiency and effectiveness opportunities through sharing of
processes, technology and information.
b. Customer Related Benefits:
i. Better and wider customer interaction with a greater variety of information
available for improved understanding of customers and identification of
opportunities for increasing value per customer (business intelligence)
ii. Increased customer loyalty through better understanding of customers
iii. Better customer experience reducing churn and increasing loyalty
iv. Opportunity to leverage and improve brand perception Customers
themselves also benefit from increased choice in interaction opportunities and
the ability to switch channels as convenient.
Challenges and Opportunities:
Consumer behavior is driving multichannel growth and if retailers want to stay
in touch with their customers they must adapt now. Technology is driving this
change. Ease of access to internet has changed the way consumers are shopping
now.
Some of the characteristics of multi-channel retailing are:
i. The heart of a multi-channel strategy is to allow the customer to interact with
the retailers the way the former wants to.
ii. Multi-channel customers are more profitable than other customers.
iii. Requires a seamless experience that means price across channels are same,
loyalty is rewarded through every channel, etc.
iv. Providing a Consistent Product Range
v. Capture Every Possible Order
vi. Have the Right Staff and with right knowledge
vii. Support multi-channel customer service
viii. Integrating Back-office appropriately
ix. Providing consistent consumer experience across the channels
x. Reducing or abolishing organizational boundaries to cope with new channels.
Future of Multi-Channel Retailing:
Today’s shopping experience is increasingly mobile, social and content rich;
hyper- connected consumers demand great experiences across all touch points,
not just the in-store experience. E-commerce and M-commerce are the latest
additions to the multichannel mix.
The key benefit for retailers of multichannel is that it gives them more
opportunities to showcase their product, and to customers whom they wouldn’t
have been able to reach with a single channel. However, it has the biggest
challenge of seamlessly integrating different channels.
Multi-channel retailing is moving towards, what is called as, Omni channel
retailing. Retailers want to connect shopping behaviors of each customer across
different channels.
Channel # 2. E-Commerce:
Electronic commerce or ecommerce is a term for any type of business, or
commercial transaction, which involves the transfer of information across the
Internet. It covers a range of businesses, from consumer based retail sites,
through auction or music sites, to business exchanges trading goods and
services between corporations. It is currently one of the most important aspects
of the Internet.
Overview:
Ecommerce allows consumers to electronically exchange goods and services
with no barriers of time or distance. Ecommerce has expanded rapidly over the
past 10 years and continues to accelerate. Retailing industry including Fashion
Retail and Grocery retailing have caught on to the bandwagon and have begun
to offer E-trading or Online Shopping.
Online stores have “shopping carts”. Shopping cart software allows consumers
to purchase goods and or services, track customers, and tie together all aspects
of ecommerce into one cohesive whole.
E-commerce can be a very rewarding venture, but you cannot make money
overnight. It is important to do a lot of research, ask questions, work hard and
make on business decisions on facts learned from researching ecommerce.
E-Commerce Strategies:
E-Commerce is growing day by day in both B2B (Business to Business) and
B2C (Business to Consumer) context. All Companies have realized the need to
have E-commerce strategy as a part of overall Retail Strategy. In the early
1990s we saw Companies setting up websites with very little understanding of
E-Commerce and Consumer behavior. Ecommerce as a model is totally
different from the traditional shopping in all respect.
Some of the points that a retailer should keep in mind while starting an e-
commerce sites are:
i. Know market trends, opportunities as well as threats – Retail Strategy
involves planning for the business growth and companies will have to deal with
various external factors.
ii. Focus has to be customer – While selling through physical traditional stores,
there exists a physical experience from the Customer’s end and hence it is easier
to build Customer relationship. E-Commerce platform has got to devise
methods to reach out to the virtual Customer on One to One basis and build the
relationship. It all begins with a nice, easy to use website which presents the
information in the “right way” which will attract customers.
iii. Differentiate from Competition – There are so many e-commerce sites and
you have to offer something better to get customers to your online store.
iv. Pricing – Selling and operational costs of online store are much less
compared to traditional physical stores, which can encourage customers to buy
in bulk.
v. Focus of logistics – The biggest challenge in running an online store is to
manage the logistics cost. Retailers have to partner with multiple logistics
companies to bring down the cost.
Challenges and Opportunities:
Some of the challenges faced by an e-commerce player are:
i. Channel integration—reach full revenue potential – Given that e-Commerce
spawned off as a separate business unit in its early days, retailers built separate
e-Commerce and store systems—which now has to be integrated with other
channels to realize full revenue potential.
ii. Impact of Social media affecting the buying behavior – Blogs, opinions,
peer- reviews, Facebook and other user generated content, play an important
part of the shopping process and impact the buying patterns. Online social
reputation monitoring and management is more important now than ever.
iii. Challenges in going global – Emerging markets present the greatest growth
opportunity for retailers. But there are challenges like complexities of
international business laws, taxation, fulfillment, etc. Due to this, we are seeing
the emergence of providers that enable international fulfillment and address the
complexities of taxation, e-Commerce provides retailers an excellent platform
to be able to sell internationally.
iv. Customer loyalty – It’s very difficult to build consumer loyalty and maintain
it for online retailers. Switching to another e-commerce site for better deal is
easy. Retailers go after their “high value” customers and entice them with deals
and reward points, but before all this the retailer needs to identify the “high
value” customers, which is a tough exercise.
v. Improve conversion – Studies have shown that only 3 out of 100 visitors on
the e-commerce sites actually make a purchase. Out of 97, 70 are those who
abandon their purchase midway. This could be because of high total cost
including shipping, complex check out process or product not available for
immediate dispatch.
Companies are working to overcome above mentioned challenges. Companies
are looking to develop tools which can help them address most of the
challenges.
Some of the steps taken by e-commerce companies are:
i. Need of personalization – Companies are using the tools to capture the
behavior of an online consumer and create a personalized page or experience
based on previous purchases, age, gender, location, etc.
ii. Availability of “on-demand” business intelligence – Companies are designing
tools based on analytics to predict what a particular customer would be buying.
Companies look to create targeted message board and suggestions window.
iii. Design effective campaigns and promotions – Promotions and campaigns
continue to be an important part of a retailer’s sales/ marketing strategy. For e-
Commerce, this continues to be an important way to drive traffic, conversion
and eventually revenues. Companies are using advanced analytical abilities to
conduct “what-if” scenarios while setting up promotions and campaigns.
iv. Tools for improving operational effectiveness – From a day-to-day
operational perspective, a lot happens in while managing e-commerce
operations—there are constant content updates, there are changes being made to
items, prices, promotions—practically in real time in response to changing
market conditions and dynamics. It becomes important for retailers to have tools
that will help them manage all these variables with effective business tools.
v. Know about yourself – Many times companies start focusing on customers
neglecting their own e-commerce business. Companies need to know what
competition is doing, what is the consumers view of the site and how does it
perform on its key business metrics. These things are equally important.
Companies constantly evaluate its Search Engine Optimization (SEO)
capabilities.
Selling through F-Commerce:
The web continues to disrupt our traditional way of thinking, transforming
industries and the business models. It has become very common to see groups
on Facebook [www(dot)facebook(dot)com] created by members who sell
products online starting from make-up to clothes. We see companies
increasingly using Facebook for e-commerce and use it as another channel for
shopping. Selling through Facebook is called F-Commerce.
F-Commerce is growing and becoming a trend as it is easy to use and doesn’t
require programming skills to set up the Facebook store. Retailers are
experimenting with this new channel hoping that their Facebook fans will drive
up the sales. The list of software developers offering F-commerce products is
growing. Many come from traditional ecommerce, offering Facebook as an
extension for their clients.
But, we personally feel that this market is oversubscribed. Facebook is place
where people come to socialize and stay in touch with friends but not looking to
do business. In February 2012, Bloomberg reported that GameStop, JCPenney,
and Nordstrom have all closed their Facebook stores. In April 2011, Gamestop
Corp. (GME) opened a store on Facebook to generate sales among the 3.5
million-plus customers who’d declared themselves “fans” of the video game
retailer. Six months later, the store was quietly shuttered.
Many internet experts question the social nature of shopping itself, and there is
considerable opinion that people visit Facebook to catch up with their Friends
and not to be sold products. Another reason why people may resist buying from
Facebook is the privacy concerns of the users.
No doubt Facebook is a powerful service and a great marketing tool.
Organizations should leverage it to get maximum benefits. There is nothing
wrong in experimenting as long organizations are build upon the lessons learnt.

Retailing – Factors Influencing Retailing

R. Hasty and J. Reardon (1997) in his book “Retail Management” stated that
retailing is the business segment with which the people have the most intimate
contact and it is retailing which is to function in a very complex external
environment.
Retailers are affected by the environment in which they operate; it influences
how and why they conduct business. This complex external environment can be
divided into two types of environment. Newman and Cullen (2002) summarized
those factors in macro and micro- environmental influences.
i. Macro-Environmental Influences:
The macro-environmental influences include the following:
(a) Political and legal – consumer protection, equal rights, safety at work,
working hours and the minimum wages.
(b) Economic – disposable income, gross domestic product, unemployment,
interest rates, inflation.
(c) Socio-cultural – social class, reference groups, culture and subculture.
(d) Technological – products, processes, information handling and management.
(e) Demographic – age, sex, marital status, household size, education and
geographic location.
(f) Physical – product availability, air and water quality and noise pollution.
These factors affect the whole sector and the people’s shopping behaviour.
Another set of factors i.e. the micro environmental influences which comprises
those factors that originate outside the retail firm, but which the retailer can
affect through its management processes.
ii. Micro-Environmental Influences:
The micro-environmental influences include:
(a) Market segments – size, behaviours, trends, locations and level of service
demand.
(b) Suppliers and intermediaries – supply channels, availability of goods,
number of alternatives, locations, geographic concentration and volume
concentration.
(c) Competitors – number, strategies, potential new entrants and rivalry.

Retailing – The Retailing Environment

Companies in this sector sell a wide range of products to consumers and
businesses, from food, apparel to hardware, household goods, and office
supplies. Major companies include US giants Wal-Mart, Home Depot, Kroger,
Costco, Target, Carrefour (France), Metro (Germany) and Tesco (UK).
Large companies, by mass merchandising, dominate some retail sectors, as their
size give them advantage and help to bring down cost of purchasing,
distribution and marketing. While large companies can compete on price,
smaller companies can compete by offering unique goods, serving local
demand, providing superior customer service and provide better overall
shopping experience to their customers.
Retail format can vary – gigantic superstores offer massive selections (e.g.
HyperCity), while kiosks allow companies to set up scaled-down versions of
retail operations in small spaces. Some retailers (like Reliance Fresh, More
Supermarkets, etc.) choose the size of their store based on the local population
and other demographics pattern.
In industries where suppliers are numerous, retailers often buy from distributors
or wholesalers to simplify the buying process and reduce the lead time (time
taken for goods to arrive at the store). However, retailers with multiple stores
often operate their own warehouses or distribution centers to receive and store
merchandise from suppliers.
Some of the factors that drive customer demand are:
1. Price:
Probably the most important factor that affects demand. Products have different
sensitivity to changes in price. Retailers try to negate this factor by offering
unique shopping experience like customer service, etc.
2. Personal Income:
Daily use items like bread and milk generally do not see much of impact due to
change in personal income but goods like Apparel and other products’ demand
increases when an individual’s income goes up. When incomes fall, individual’s
ability to purchase goods and services decreases and result in decrease in the
demand for most goods.
3. Consumer Preferences:
Customer preferences for luxury watch or apparel leads to increase in demand
for a particular product. Companies take help of Persuasive Advertising to cause
a change or develop preferences and tastes, for their products, among
consumers. When a product becomes unfashionable, demand can quickly fall
away.
4. Competition:
Producers compete with each other to take a bigger share of the market.
Sometimes their strategies can be competitive and sometimes it can be
complementary. They can compete by cutting their prices or by introducing a
new or better version of a product.
In complementary strategy, retailers try to increase their pie and try to create
more customers which help all the players in the market. For example, after
years of competition in urban India, Pepsi and Coca Cola decided to enter rural
market. It has helped both the companies increase their customer base.

Retailing – Information Technology in Retailing

Information Technology (IT) has become a vital part of retailing. It has
transformed the operation of retail marketing by providing accurate sale data
and high quality information about customers. Laser, scanner are used in most
of the large stores to read product bar codes and check all the details on the
products file. They provide the correct price in a fraction of few seconds.
Internet has enabled consumers to order products like books, CDs, clothing
groceries, etc., at any time and have them delivery to their homes.
Retailers invest a substantial portion of their resources in extensive computer
and high speed communication network. They collected and exchange data
between stores, distribution centres, suppliers, head offices and consumers.
Use of such IT systems in retailing has become more common now as their
relative costs have fallen recently. In the words of Management Horizons
(1995) “technology is becoming a virtual prerequisite to successful competition.
Retail-supplier partnerships benefit from the use of IT, in retailing. It provides
key information to reduce cost while improving productivity”.
Let us now study how IT is used to help solve retail business problems.
Illustrations:
The following is the simple case of a retail chain comprising five clothing
shops.
Each store is equipped with a PC. The PC holds information about the stock in
the store in terms of items is sold to a customer, a hand held device reads. The
bar code on the label deducts the item from the shop’s stock. Overnight, the
sales details on each store’s computer are downloaded automatically through a
telephone line to the company PC in the main store.
Every morning, the owner of the chain stores is able to review the previous
day’s sales performance of every store of his. While placing orders with the
suppliers, the weekly and monthly sales of figures for each type of product sold
last year and this year compared. The retailer is able to identify the product lines
that are selling very well in the first few days. He places ‘top up’ orders with his
suppliers. He can also reallocate stock among branches to ensure that every
store has adequate range of sizes, course and designs.
Applications of IT in Retailing:
IT used in retailing to carry out basic functions such as selling items, capturing
the sale data by items, stock control, buying, management reports, customers
information and managing the finance of the business. However, the most
advanced retailers use IT to gain competitive advantages the retailer’s offer and
provides innovation in ways that are appreciated by the customer.
Taylor (1998) argues that IT system such as data mining, multimedia kiosks and
web-based commerce are helping retailers of differentiate their services from
their competitors. IT enables business organizations to develop closer
relationships with their customers.
Lower and Wrigley (1996) suggests that retailers use IT in the following
ways:
1. Investment in IT along with organizational changes, improved retail logistics,
reducing delivery lead times resulting in reduced inventory holdings.
2. Better information about consumers demand supported by retail policies in
own brand, product development and the focusing, refocusing and redefinition
of many of successful firms.
3. Cutting labor cost by effective staff scheduling and by using more part-time
and casual staff. Retailers are able to use IT to measure staff performance,
enabling further cost reduction with the help of quality information about
transactions and performance levels.
David Gilbert holds that IT is having a major impact on the modern retail
business. Article bar coding combined with the advent of business to business
electronic commerce, creates and provides the following advantages for the
retailer.
1. Cost Productivity Benefits:
(a) Efficiency of time/transaction speed increases
(b) Reduced queuing times
(c) Operating cost reduction e.g. less ticketing
(d) Increased accuracy of all aspects of the sales
(e) Improved administration
(f) No new keying required
(g) Shorter lead time
(h) Reduction in stock outs and stock holding
(i) Pricing can be changed easily and accurately.
2. Marketing Benefits:
(a) Improved data-effectiveness of promotions, forecasts of sales, stock records
etc.
(b) Faster distribution cycle system.
(c) Improved trading partner relationship.
(d) Ability to incorporate faster responses to changing market conditions.
(e) Consumers benefits from operational efficiencies e.g. shorter queues.
(f) Building of loyalty schemes and databases.
(g) Additional selling space owing to reduced stockholding.

Retailing – Importance of Retailing in Indian Economy

The retail sector is particularly important because retailing is the final link in the
chain of production which begins at the extractive stages, moves through the
manufacturing processes and ends by the distribution of goods (and services) to
the final consumer.
Retailing accounts for about 15-20% of the organized workforce in any
developed economy. It is the second largest employer in the India after
agriculture. There are about 6 million retail establishment in India. Of which,
4.1 million (70%) sell food products, and related items. An interesting research
in this area has shown that grocery stores (56% of all retail outlets) and general
stores (13%) dominate rural India.
There are 1.8 million retail outlets in urban India. Of which more than 50% earn
between Rs. 7,500.00 to Rs. 25,000.00 daily. Approximately 6.6% of urban
adults in India are shop owners. There are about 21% outlets in urban area
engaged in service retailing. Though no official data is available, the given
above figure indicate that this sector may be employing about 15-20% of the
organized work force, which is in line with global averages.
Retailing accounts for an impressive part of Gross Domestic Product (GDP).
The year 1997 – 1999 has been a slowdown in economic growth with the GDP
growth rate pegged at 4 to 5 %. Total retail sales in India reached Rs. 5793
billion in 1996 representing around 53% of GDP and 69% of consumer
expenditure. Retail sales per capita was Rs. 6297 in 1996.
In US the sales of retail sector is about US$2 trillion. In India, if private final
expenditure is taken as an indicator, the total retail trade in India could be about
Rs. 700,000- Rs. 800,000 crores or USS 160-180 billion (excluding fuels). In
US, the annual sales of Wal-Mart (world’s largest retailer), K-mart, and Sears
are much greater than the annual sales of Proctor and Gamble, PepsiCo, and
RJR Nabisco- the three largest consumer products manufacturer.
In India, organised retailing is a relatively new concept, still organised retailing
accounts for approximately Rs. 13,300 Crores. It is expected to grow at 28%
rate becoming Rs. 45000 Crores by 2005. The turnover of India’s biggest
retailer Shoppers’ Stop is about Rs. 210 crores annually.
Retailing is also important, as it is an important tax collection point for the
government.
There are number of small shops and stores in a suburban location. The area is
dominated by middle class and upper middle class service employees. A super
market chain opened a store in that area with the supply of fast moving
consumer goods (FMGCs). The resident of the area were used to shop at the
local stores and were hesitant to enter the posh looking supermarket.
Later on, when they realized that the same products are available in the
supermarket at cheaper rate, they started visiting the supermarket. Within a
year, the supermarket got good hold of the market and the sales increased by
almost 200% from the initial months.
1. FDI:
Foreign Direct Investment and foreign capital is its major initiative
needed to strengthen the organised retail. FDI can bring better
technology and managerial skills needed to organise and promote the
retail on large scale. India is scarce of capital and adequate technology
that is necessary to promote organised retail.
Allowing the FDI to take part in multi brand and single brand
products and its entry into every range of city i.e., ‘A and B’ Category
cities like Mumbai, Delhi, Bangalore and ‘C’; Category cities like Hubli
– Dharwad Davangeri Mysore etc., and in every part of India will bring
necessary capital, money men machine and management idea i.e.,
basic to promote organised retail.
2. Development of Infrastructure:
Development of Infrastructure villages and towns provide raw
material and inputs necessary for development of retail. The
connectivity between rural and urban centers is necessary that calls for
better roads and communication. Warehousing is another area that
can create time and place utility and increase value of manufactured
goods.
India does not have problem with production, lack storage space is
deteriorating and damaging products. Creation of capacity in storage
particularly cold storage at affordable cost can help for both farmer
and retailer. Along with this facility of easy and quick finance,
insurance can encourage the promotion of retail industry.
3. Education and Training:
Retail sector has potential to offer employment opportunities in
different area connected with the industry. Qualified staff is necessary
to manage activities connected with retailing and also in the areas of
Warehousing, Financing Banking and Insurance. Retail Sector can
provide adequate employment in that area provided qualified and
trained staff is available.
India does not have educational and training schools that can produce
qualified people to handle operations connected with the area Retail
education should be offered in schools and colleges, Certificate,
Diploma and Degree courses in the area along with the adequate
training institutes can help to get competent staff to manage affairs of
retail sector.
4. Provision of Real Estate:
Organized retail requires large area of land and building specially
designed for retail operations. Land value in India is very high,
buildings are not specifically designed to undertake retail activities.
They are located in large buildings that are like big warehouse.
This may not provide the required ambience; comfort and convenience
necessary in retail shopping Government should initiate steps to ear
mark separate land for retail houses (like done in case of Industries).
Necessary steps should be undertaken to create buildings complex that
can house all departments. Facilities of retail at proper places to give
comfort and satisfaction to visitors.
5. Educate People in Consumption Habits:
People of India do not have healthy consumption habits. Basically,
they do not want to spend money, they believe in saving they spend on
gold jewellery, invest in real estate (due to which their prices are
rising). Healthy consumption habits must be promoted. People should
be educated to spend on the items that can give them satisfaction
without compromising on quality and health.
Food on the roadside, cheap garments and jewellery, un-standard,
electronic items may be available at cheap price but it will affect
health, disregards safety and may be dangerous. To save few rupees,
we may be compromising with quality and durability. People must be